Bold intervention in university fee deregulation debate

If you want to fire up a room of economists, mention “trickle-down theory”. It’s the controversial notion that giving tax breaks and other benefits to the rich will eventually boost the incomes of the poor when it “trickles down” to them.

Now the theory has, surprisingly, entered the debate over university fee deregulation.

In a speech to the National Press Club on Wednesday, Group of Eight Universities chair Ian Young revealed he expects many elite universities, such as his own Australian National University, to enrol fewer students if the federal government allows universities to set their own fees.

Australia's top research universities such as ANU, Sydney and Melbourne are huge by world standards - typically enrolling 40,000 students, compared to Stanford in the United States with 15,000.

This is because, under the capped fee system, universities must enrol huge numbers of students to subsidise their research programs.

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If elite universities are allowed to increase their fees then they will be able to reduce the size of their institutions and offer a more personalised learning experience, Young said. This exactly what some of his fellow vice chancellors have told him they will do.

This downsizing would have a “trickle-down” effect throughout the university sector and lead to more high-achieving students attending regional and suburban universities.

“In a sense, if you’re not a Group of Eight university that should be good news, because what it means is it’s going to free up in the future more capable students for other institutions,” he said. “I think there will be a trickle-down or a flow-across effect as a result of that and I think that will be good for the quality of education we provide and indeed for the quality of research we provide.”

This is a bold, intriguing intervention into a debate that has been running against the advocates of fee deregulation. Polling shows Australians don’t like the idea; so far, most of the key Senate crossbenchers don’t either.

The perception that elite universities will be the big winners – and less prestigious universities, who can’t jack up fees, the losers - hasn’t helped.

Young is trying to reset that zero sum equation: just because the rich unis win, he argues, doesn’t mean the poor ones will lose.

Expect plenty of debate on this over coming days. Other vice chancellors insist there will be losers – as well as winners – in a deregulated environment and that Young is too sanguine about the challenges the non-elite sector faces.

The key person Young has to win over, of course, is Senate kingmaker Clive Palmer. And so far he’s been hostile to fee deregulation.

But one suspects trickle-down economics would appeal to a billionaire businessman who has bought his favoured employees Mercedes Benz cars for Christmas.